Will Gold Shine Once Again?

It's no secret that gold has underperformed the general market thus far in 2012. Even with the rally from the December 29 low of $1,520 per ounce, gold has "only" risen about 6 percent, compared to the S&P 500's return of 12 percent in the first quarter. The question begging to be asked is, "Is this a buying opportunity in gold?"

I think it could be--at least if any of the following holds true: the U.S. economy shows further weakness later in the year; the U.S. dollar gets compressed by foreign currencies; QE3 is propagated by the Fed; inflation starts to heat up in the third or fourth quarter; or global central banks continue or increase gold purchases.

If one of the above events comes to fruition, gold could potentially outperform equities in the mid-term, so I think it makes sense to consider conservatively adding gold to a truly diversified portfolio.

I think the best approach is to buy into gold using a "phased approach," meaning to gain exposure over a period of time through a variety of strategies. Options include gold ETFs, gold mining stocks, gold-linked CDs, physical gold, and managed futures.

You can't turn on the TV without seeing commercials enticing you to buy gold, but one of the techniques rarely discussed is managed futures. Managed futures can be a collection of equity indexes, currencies, commodities, etc. that is designed to perform well during volatile times and not be highly correlated to the market. Professional futures managers use trending patterns and volatility to their advantage. With the market and gold expected to continue to be volatile, this approach may hold the brightest appeal, especially in the form of managed commodity future funds.

One of the main benefits of managed commodity funds is that the manager's goal is to go long OR short depending on the trending patterns of the specific commodities. You can buy managed futures ETFs or, for greater non-correlation to the market, invest in a product that is managed by a top-notch trader like the legendary Bill Eckhardt. Either way, make sure you review the fund's approach, performance history, and fee structure.

Robert Russell is CEO & CIO of the Ohio-based Russell & Company, a private wealth management firm specializing in helping affluent individuals ages 45 and up create and preserve their wealth. He co-hosts a radio show, authors The Rob Report blog, and is a frequent contributor to FOX Business and CNBC.